1) UNBILLED REVENUE
Unbilled revenue as at March 31, 2014 amounting to Rs. 2626.08 crores
(March 31, 2013: Rs. 2303.35 crores) primarily comprises of the
revenue recognised in relation to efforts incurred on turnkey contracts
priced on a fixed time, fixed price basis of Rs. 1987.30 crores (March
31, 2013: Rs. 1509.25 crores).
2) Current tax includes additional provision (net) of Rs. 467.62
crores (March 31, 2013: additional provision (net) Rs. 39.12 crores)
in domestic and certain overseas jurisdictions relating to earlier
years, of which the impact on MAT entitlement of earlier period is Rs.
451.92 crores (March 31, 2013 : Rs. 128.97 crores).
3) AMALGAMATION OF COMPANIES
a) Nature of business
TCS e-Serve Limited is engaged in the business of providing information
technology enabled services, business process outsourcing services
(BPO) for its customers primarily in the Banking, Financial services
and Insurance domain. The Company holds 96.26% of the voting power of
TCS e-Serve limited. TCS e-Serve Limited has two wholly owned
subsidiaries: TCS e-Serve International Limited and TCS e-Serve America
Inc.
b) TCS e-Serve Limited has been amalgamated with the Company with
effect from April 1, 2013 in terms of the composite scheme of
amalgamation (Scheme) sanctioned by the High Court of Judicature at
Bombay vide their Order dated September 6, 2013. The Scheme came into
effect on October 1, 2013 and pursuant thereto all assets, unbilled
revenue, debts, outstanding, credits, liabilities, benefits under
income tax, service tax, excise, value added tax, sales tax (including
deferment of sales tax), benefits for and under Software Technology
Parks of India (STPI), duties and obligations of the TCS e-Serve
Limited, have been transferred to and vested in the Company
retrospectively with effect from April 1, 2013.
Pursuant to the Scheme coming into effect, all the equity shares held
by the Company in TCS e-Serve Limited shall stand automatically
cancelled and remaining shareholders of TCS e-Serve Limited holding
fully paid up equity shares shall be allotted thirteen shares of Rs. 1
each in the company, credited as fully paid up, for every four equity
shares of Rs. 10 each fully paid up held in the capital of TCS e-Serve
Limited by adjusting the General reserve.
c) The amalgamation has been accounted for under the pooling of
interests method as prescribed by Accounting Standard (AS-14) notified
under Section 211(3C) of the Companies Act, 1956. Accordingly, the
assets, liabilities and reserves of TCS e-Serve Limited as at April 1,
2013 have been taken over at their book values and in the same form.
The difference between the amounts recorded as investments of the
Company and the amount of Share Capital of the TCS e-Serve Limited has
been adjusted in the General Reserve.
d) The Scheme also proposes the de-merger of SEZ undertaking of TCS
e-Seve International Limited (TEIL) into the Company. Upon coming into
effect of this Scheme and with effect from April 1, 2013, all assets,
unbilled revenue, debts, outstanding, credits, liabilities, benefits
under income tax, service tax, excise, value added tax, sales tax
(including deferment of sales tax), benefits for and under special
economic zone (SEZ) registrations, duties and obligations of TEIL SEZ
undertaking shall vest in or deemed to be transferred to the Company as
a going concern.
4) RETIREMENT BENEFIT PLANS
(a) Defined contribution plans
The Company makes Provident Fund and Superannuation Fund contributions
to defined contribution retirement benefit plans for eligible
employees. Under the schemes, the Company is required to contribute a
specified percentage of the payroll costs to fund the benefits. The
contributions as specified under the law are paid to the provident fund
set up as a trust by the Company. The Company is generally liable for
annual contributions and any shortfall in the fund assets based on the
government specified minimum rates of return and recognises such
contributions and shortfall, if any, as an expense in the year it is
incurred.
The Company recognised Rs. 514.91 crores (March 31, 2013: Rs. 430.24
crores) for provident fund contributions and Rs. 136.29 crores (March
31, 2013: Rs. 106.36 crores) for superannuation contributions in the
statement of profit and loss. The contributions payable to these plans
by the Company are at rates specified in the rules of the schemes.
The Company has contributed Rs. 177.75 crores (March 31, 2013: Rs.
123.86 crores) towards foreign defined contribution plans.
(b) Defined benefit plans
The Company makes annual contributions to the Employees Group
Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of
India, a funded defined benefit plan for eligible employees. The scheme
provides for lump sum payment to vested employees at retirement, death
while in employment or on termination of employment of an amount
equivalent to 15 days salary for service less than 15 years,
three-fourth months salary for service of 15 years to 19 years and one
month salary for service of 20 years and more, payable for each
completed year of service or part thereof in excess of six months.
Vesting occurs upon completion of five years of service.
The present value of the defined benefit obligation and the related
current service cost were measured using the Projected Unit Credit
Method, with actuarial valuations being carried out at each balance
sheet date.
The following table sets out funded status of the gratuity plan and the
amounts recognised in the Companys financial statements as at March
31, 2014.
The estimate of future salary increase considered in actuarial
valuation takes account of inflation, seniority, promotion and other
relevant factors such as supply and demand factors in the employment
market.
The expected return on plan assets is determined considering several
applicable factors mainly the composition of the plan assets held,
assessed risk of asset management, historical results of the return on
plan assets and the Companys policy for plan asset management.
5) SEGMENT REPORTING
The Company has identified business segments (industry practice) as its
primary segment and geographic segments as its secondary segment.
Business segments are primarily financial services comprising customers
providing banking, finance and insurance services, manufacturing
companies, companies in retail and consumer packaged goods industries,
companies in telecommunication, media and entertainment and others such
as energy, resources and utilities, Hi-tech industry practice, life
science and healthcare, s-Governance, travel, transportation and
hospitality, products, etc.
Revenues and expenses directly attributable to segments are reported
under each reportable segment. Expenses which are not directly
identifiable to specific segment have been allocated on the basis of
associated revenues of the segment and manpower efforts. All other
expenses which are not attributable or allocable to segments have been
disclosed as unallowable expenses.
Assets and liabilities that are directly attributable or allocable to
segments are disclosed under each reportable segment. All other assets
and liabilities are disclosed as unallowable. Fixed assets that are
used interchangeably among segments are not allocated to primary and
secondary segments.
Geographical revenues are allocated based on the location of the
customer. Geographic segments of the Company are Americas (including
Canada and South American countries), Europe, India and Others.
6) CONTINGENT LIABILITIES
(Rs. crores)
As at As at
March 31, 2014 March 31, 2013
Claims against the Company not
acknowledged as debts 29.57 23.67
Income Tax demands (See (a) below) 3890.20 2589.73
Indirect Tax demands (See (b) below) 63.27 62.59
Guarantees given by the Company on
behalf of subsidiaries (See (c) and
(d) below) 4082.31 4627.42
a) In respect of income tax demands of Rs. 318.20 crores (March 31,
2013: Rs. Nil), not included above, the Company is entitled to an
indemnification from the seller of TCS e-Serve Limited, which has been
amalgamated with the Company effective April 1, 2013.
b) In respect of indirect tax demands of Rs. 8.53 crores (March 31,
2013: Rs. Nil), not included above, the Company is entitled to an
indemnification from the seller of TCS e-Serve Limited, which has been
amalgamated with the Company effective April 1, 2013.
c) The Company has provided guarantees aggregating to Rs. 3167.02
crores (GBP 317.20 million) (March 31, 2013: Rs. 2910.88 crores) (GBP
353.65 million) to third parties on behalf of its subsidiary Diligenta
Limited. The Company does not expect any outflow of resources in
respect of the above.
d) The Company has provided guarantees aggregating to Rs. 83.91 crores
(USD 13.97 million) (March 31, 2013: Rs. 1208.41 crores) (USD 222.42
million) to third parties on behalf of its subsidiary Tata America
Corporation Limited. The Company does not expect any outflow of
resources in respect of the above.
7) CAPITAL AND OTHER COMMITMENTS
a) Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances) Rs. 2811.44 crores
(March 31, 2013: Rs. 3328.51crores).
b) The Company has undertaken to provide continued financial support to
its subsidiaries APOnline Limited and TCS FNS Pty Limited.
c) The Company has a purchase commitment towards India Innovation Fund
for the uncalled amount of balance Rs. 36445.78 per unit of 1000 units
aggregating to Rs. 3.64 crores (March 31, 2013: Rs. 4.74 crores).
8) DERIVATIVE FINANCIAL INSTRUMENTS
The Company, in accordance with its risk management policies and
procedures, enters into foreign exchange forward, options and future
contracts to manage its exposure in foreign exchange rates. The counter
party is generally a bank. These contracts are for a period between one
day and eight years.
Net gain on derivative instruments of Rs. 21.15 crores recognised in
Hedging Reserve as of March 31, 2014, is expected to be reclassified to
the statement of profit and loss by March 31, 2015.
In addition to the above Cash Flow Hedges, the Company has outstanding
foreign exchange forward, options and future contracts with notional
amount aggregating Rs. 15774.90 crores (March 31, 2013: Rs. 10427.63
crores) whose fair value showed a gain of Rs. 261.23 crores as on
March 31, 2014 (March 31, 2013: gain of Rs. 51.21 crores). Exchange
loss of Rs. 66.60 crores (March 31, 2013: Exchange gain of Rs. 271.95
crores) on foreign exchange forward, options and future contracts for
the year ended March 31, 2014 have been recognised in the statement of
profit and loss in respect of these hedges.
As of balance sheet date, the Company has net foreign currency
exposures that are not hedged by derivative instruments or otherwise
amounting to Rs. 681.53 crores (March 31, 2013: Rs. 375.25 crores).
9) Research and development expenditure aggregating to Rs. 176.31
crores (Previous year: Rs. 151.36 crores), including capital
expenditure, was incurred during the year.
10) Previous years figures have been recast / restated.